i-Cable begins recovery process

Rose Major

i-Cable Communications, operator of the Hong Kong Cable TV platform, said its businesses started to recover in the first half of 2009 after a “woeful” 2H 2008. The group returned to profitability – but only just, with net profit of HK$5 million for the six months to the end of June, compared with HK$26 million in the same period 2008. In 2H 2008, net loss was HK$137 million.

In its results statement, management cautioned that while there are signs that the group’s main businesses are beginning to recover, “these are still early signs and whether these will turn into a sustainable trend will much depend on the macro economy and the competitive landscape.”

For instance, while pay-TV subscribers did grow in the half-year – adding 30,000 or 3% to reach 947,000 – pay-TV revenues decreased 15% to HK$595 million, mainly attributable to dilution from lower-yield subscriptions.

As well as the economic climate, i-Cable also has strong competition from PCCW’s Now TV IPTV service to contend with, as well as broadband internet competition from both fixed and mobile operators and a growing digital-terrestrial TV platform on the horizon.

“The operating environment remained austere with competition coming from both without and within the pay-TV market,” the statement added. “Free digital terrestrial television continued to expand coverage albeit at a slower pace, competing indirectly with pay-TV, but there us yet to be any significant impact on our business. The Group will continue to invest in unique programming to achieve positive subscriber growth in the pay-TV sector.”

Total revenues fell 19% y-o-y to HK$862 million. Operating costs before depreciation fell by 16% to HK$722 million, including programming costs down 8% and network costs by 9%.

Pay-TV operating costs fell 7% to HK$594 million, with operating profit of HK$1 million compared with a HK$55 million loss in the previous half-year and profit of HK$61 million in the corresponding period.

Capital expenditure amounted to HK$125 million, a whopping 84% higher than the same period 2008. Major items included new set-top boxes for the new generation transmission encryption system Hong Kong Cable TV is installing (due to be completed by October) as well as TV production facilities for high-definition channels, launching this month.